Appetite for Junk Bonds Shrinking Fast

Individual investors’ love affair with junk bonds appears to be on the rocks.

High-yield bond funds saw their fourth-largest redemptions on record in the latest week. In addition, professional investors have increasingly bearish positions on some of the funds and plans for new bond sales have been pulled.

The net outflow of $2.46 billion from high-yield mutual funds and exchange-traded funds contributed to the first weekly outflow for the entire taxable bond fund universe since mid-December, according to Thomson Reuters-owned Lipper.

It was also the biggest weekly withdrawal from junk-bond funds since August–despite being only the third outflow in the last 25 weeks, a stretch that saw $25.8 billion flow into the funds.

That is a marked shift in sentiment from earlier in the year, when a rally driven by optimism over Europe lifted all boats–even scrap in the junkyard–making high-yield bonds a magnet for investors’ cash.

“Lately, a combination of pressures from Europe and questions about growth globally have made a lot of investors refocus their portfolios and reduce risk,” said George Bory, global head of credit strategy at UBS.